Supreme Court and Aereo: A Betamax ruling for the 21st century?

Aereo CEO Chet Kanojia

Bebeto Matthews / Associated Press

In this December 2012 file photo, Chet Kanojia, founder and CEO of Aereo Inc., shows a tablet displaying his company's technology in New York. Aereo is one of several start-ups created to deliver traditional media over the Internet without licensing agreements.

In this December 2012 file photo, Chet Kanojia, founder and CEO of Aereo Inc., shows a tablet displaying his company's technology in New York. Aereo is one of several start-ups created to deliver traditional media over the Internet without licensing agreements. (Bebeto Matthews / Associated Press)

Having ducked the question once, the Supreme Court on Friday agreed to decide whether the principles outlined in the landmark 1984 Sony Betamax ruling apply when devices in the home give way to services in the cloud.

At issue is whether Aereo, a start-up backed by media mogul Barry Diller, violates the broadcast networks' copyrights. In 10 cities across the country, Aereo rents customers a tiny, individual digital TV antenna with a clear view of the broadcasters' transmission towers. The antenna tunes whatever station the customer chooses, then passes the signal to a digital video recorder connected to the Internet. The customer can then stream live or recorded shows through the Net to a computer, smartphone or set-top box. Aereo offers this service without obtaining licenses from or paying royalties to the networks.

The broadcasters argue that what Aereo does constitutes retransmitting a copyrighted work to the public, and that's illegal under copyright law. The question for the Supreme Court is whether the transmissions amount to a public performance of the work; the broadcasters say yes, the U.S. 2nd Circuit Court of Appeals said no.

(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or (2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

The first instance covers such things as movie theaters and bars that play music. The second appears to refer to cable TV companies and other pay TV operators that retransmit the networks' signals to their customers' homes.

That seems clear, right? Aereo offers a low-cost equivalent of the cable operators' most basic tier, therefore the law should treat it the same as it does a cable company.

But Aereo isn't doing that, exactly. It's not aggregating a bunch of networks' signals and feeding them into its customers' homes en masse. It's offering people help in tuning in the free, over-the-air broadcasts that are being beamed throughout their communities.

To the broadcasters, the key point here is that their networks are being tuned in on Aereo's equipment on Aereo's property, not in the customer's home. To the 2nd Circuit, though, the location of the equipment didn't matter. What mattered was that customers were choosing what to tune in, record and stream, and each recording and stream served only one customer. That meant the performance was private, not public, the 2nd Circuit said.

Its reasoning was similar to the 2nd Circuit's ruling in favor of Cablevision's network DVR. In that case, the court ruled that it made no difference legally whether the DVR was on a customer's TV or back in the cable operator's headquarters, as long as the recordings were controlled by and unique to each customer. This sort of time-shifting of programs fell under the fair-use banner that the Supreme Court erected in the Betamax case.

The Supreme Court declined to consider the Cablevision case on appeal. Since then, a number of start-ups have sought to shift recording, storing and viewing functions from the home to the cloud, giving people the chance to watch what they want when and where they want to watch it. It's cheaper and more efficient than trying to deploy a bunch of set-top boxes, provided that the networks don't sue.

For its part, Aereo welcomed the Supreme Court scrutiny.

"This case is critically important not only to Aereo but to the entire cloud computing and cloud storage industry," said the company's chief executive, Chet Kanojia. “We believe that consumers have a right to use an antenna to access over-the-air television and to make personal recordings of those broadcasts. The broadcasters are asking the court to deny consumers the ability to use the cloud to access a more modern-day television antenna and DVR. If the broadcasters succeed, the consequences to consumers and the cloud industry are chilling."